Why WWE Shares Are on the Ropes Today - Barron's

Last night, World Wrestling Entertainment said its business was going just about as expected, and yet the stock is down 4.8% Tuesday, to $18.86

The reason has nothing to do with earnings, but rather the company’s decision to raise as much as $200 million through a vehicle known as a “convertible note.” The notes act like a bond, in that the holders will receive semi-annual interest payments until the loan gets paid back in 2023. But unlike a traditional bond, these notes can be converted into WWE stock under certain conditions.

And that’s the part that investors don’t like. If the bond holders convert $200 million worth of loans into stock, existing shareholders suddenly own a smaller piece of the company, because they have to make room for the new stock. That so-called dilution is why WWE shares are down Tuesday.

WWE says its raising the money “to support the execution of the company’s long-term growth strategy and for general corporate purposes.”

On Monday night, the company also said it now sees “at least 1.4 million average paid subscribers” during the fourth quarter for its WWE Network, a 24/7 Internet-based TV channel that shows live and archived WWE events. That’s roughly in line with the company’s previous estimate of 1.37 million to 1.43 million.

Big Picture: WWE is raising up to $200 million through a bond called a convertible note. The bond is attractive to new buyers because it can be converted into the company’s stock. But that has current shareholders less than thrilled.

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